India explores currency swaps in struggle to stem rupee’s plunge

India said it will set up a panel to identify potential partner countries for currency-swap agreements as the nation tries to buttress foreign reserves and stem the rupee’s record plunge.

The task force will report in a month, Commerce Minister Anand Sharma said at a briefing in New Delhi today. India’s economic growth is expected to exceed 5.5 percent in the fiscal year ending in March 2014, he said.

The rupee tumbled to an unprecedented 66.19 per dollar today as the prospect of reduced U.S. Federal Reserve stimulus and India’s record current-account deficit spur capital outflows. Boosting foreign reserves is key to rupee stability, Bank of America Merrill Lynch said this month.

“We think the authorities will continue to explore swap facilities with other central banks, can put further controls on imports, especially of luxury items, and can attempt to increase capital inflows, for instance by issuing quasi-sovereign bonds,” Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai, wrote in a note.

India entered a $15 billion swap arrangement with Japan in 2011 to improve access to dollar funding during a crisis.

The rupee slumped 2.9 percent by the close in Mumbai, the most since February 1996, and has depreciated about 18 percent in the past six months.

The Reserve Bank of India may delay its monetary-policy announcement to Sept. 20, after the Fed’s meeting next month, Bloomberg TV India reported today, without saying where it got the information. The RBI decision is currently due on Sept. 18.